who is the redheaded stepchild of allstate's Distribution system?

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feature Looking a Gift Horse in the Mouth Is the new CFPA program a blessing or a curse For the last five years, Allstate has remained steadfast in the termination of long-term agents. The reason for the elimination of the most profitable and most experienced of the company’s sales force remains a mystery. To most observers, including the agency force, it smelled a lot like cost cutting, because the terminated agents’ accounts were assigned to company call centers for servicing, thereby eliminating the need to pay renewal commissions. Over this five-year period, hundreds of thousands of agent-oriented “Personal Touch Loyalists” were suddenly dumped into that policyholder hellhole known as the CIC. But try as they may, call center employees simply cannot match the policyholder retention levels of the departed agents. For one thing, these orphaned customers are not the self-directed customers that Allstate envisioned. They do not want to deal with someone 1,000 miles away – they bought their insurance from a local agent and they want to keep it that way. NAPAA estimates the average tenure of a terminated long-term agent to be around 25 years. Because they were around for so long, they represented stability in the lives of their customers. Then, after taking care of their customers’ families for two, three or more generations, they were unceremoniously sacked, leaving their customers high and dry – without an agent of their choice or a credible explanation. To make matters worse, they were relegated to the CIC, where mistakes and incompetency abound. Yet when they were at their wits’ end and tried to break free of the call center experience by calling a local agent for service, they were often shunned or treated like second class citizens because they bore the scar- let letter of the CIC. While most Allstate agents are empathetic and want to help, too many of them have spent hours fixing problems created by the CIC for little or no pay. It comes as no surprise to the agency force that retention is a problem with this group of policyholders. Throughout this painful experience, both the agency force and NAPAA pointed out that assigning these accounts to the CIC was a bad move. Maybe they thought the agents’ objections were a ploy to line their own pockets with renewal commissions rather than an expression of genuine concern for customer and company – which was their principal concern. Long-term agents understand long-term customers and knew that the CIC environment would not work for them, mainly because they bought and paid for the services of a local agent. And forcing them to deal with call centers was akin to slapping them in the face. Now, after hemorrhaging countless policyholders, it appears that Allstate has finally seen the light, concluding that the best way to provide exceptional service to these customers is to return them to the agents. They are now pulling these policies out of the CIC and assigning large blocks of them to select agents for service. Undoubtedly, this reversal in company thinking is not a nod to the agents or to NAPAA, but a desperate attempt to stem the outflow of customers, who have been left floundering without an agent. We’re still not sure if they get it, but regardless of their motive, management should be commended for its attempt to get these policies back into the hands of the agency force. Clearly, this colossal fiasco was completely self-inflicted and would not exist if the company had listened in the first place. As much as we applaud the company for coming around to its senses on this issue, the new program is not without flaws. The CIC policy reassignments are being executed with frenzied urgency. Policies are being pulled from the call centers and are assigned to agents selected by the company. Customers with more than one policy may be assigned to different agents. Even where there is a full agent of record on one policy, other policies may be assigned to a different agent. Oftentimes, the newly assigned agent is located miles away from the customer even though there are other agents located nearby. Customers are perplexed as they try to figure out why their policies have been shifted yet again. Adding to the confusion, customers who have already established a relationship with an agent – and taken time to request that agent – are being reassigned to a different agent. This frantic attempt to reassign the CIC to the agency force appears to have been hastily designed and executed without considering what was best for the affected customers. “Select Agents” can receive entire books of business, up to 1,800 policies, and receive a temporary servicing commission of 6%. After five years, the policies convert to the full commission rate. It is possible to shorten the commission conversion date to three years by achieving certain benchmarks. In addition, agents will be eligible for one additional payment at the end of five years if the combined PIF total is 15% greater than the beginning PIF and if retention and profitability remain at Expected Results levels. On the surface, agents might think this is a good deal, but NAPAA is advising agents to fully consider the consequences of accepting any such policies because once accepted, you may not elect to remove them from your book. We suggest that agents gather as much information as possible before making a final decision. 16 — Exclusivefocus Winter 2011/2012
Keep in mind that many of the agents took their TPP because they plan to solicit their old books after their one-year non-compete expires. These formidable former agents are itching to get even with Allstate and are determined to write as many of their old customers as possible – and most of them will. Other Considerations Besides the issues previously mentioned, orphaned policies have other problems. The previous agent may have been terminated for cause, such as incorrect rating territories, invalid discounts, and the omission or misclassification of drivers in household, etc. The responsibility for these policies, and the E&O exposure for them, transfers to the new agent at the next policy renewal. So if the previous agent was sloppy or was caught cheating, the new agent would be wise to perform thorough reviews on each policy. This could also be true for CIC serviced policies, which have been known to generate hours of service work to correct errors made at the CIC. Agents will not receive any information regarding the quality factors of the book they are receiving. The assigned policies will be merged into the agents existing book as they renew and their retention, loss ratio and ALI will affect the quality factors of the existing book. These numbers will also affect Expected Results and agent bonus calculations. Agency size is based on the combined books – the CIC book and the existing book – which could unintentionally move a small agency up to a medium or a large to a mega, increasing production requirements accordingly. In addition, the IIF calculation on the CSRP is currently overstated due to an error in programming, but this should come as no surprise considering the company’s obvious lack of preparation. Unlike the agent of record problems, Home Office is working on a “fix” for the IIF calculation. Agents may also be required to do certain things before policies are assigned, such as: • Hire one full time LSP for every 600 customer households assigned under the program, which means allocating 40 hours per week to CFPA retention efforts. Therefore, an agent receiving 1,800 policies, may be required to hire three LSPs and devote 120 hours a week to retain the assigned accounts. • Hire at least one more LSP to achieve the agency’s overall growth and retention goals. • Sign a Letter of Understanding. • Agree to sign and consent to an “Agency Charter” promising that the agency will be open for business every Saturday, offer annual coverage reviews, and proactively contact customers prior to premium changes, as well as other concessions. • Purchase and decorate office with the BRE package. • Maintain the Good Hands Certification, meaning mandatory woople training for agent and staff every month. • Submit a business plan. • Sign a new contract. If an agent is asked to sign a new contract in order to acquire the assigned policies, keep in mind that signing a new contract may change the TPP provision. R3001 agreements dated before November 1999 include the TPP provision in the contract itself, which cannot be changed unless the agent agrees to sign a new contract. Under the current R3001 agreement and any agreement signed after November 2000, the TPP provision is found in the Supplement, which can be easily amended by the company. Also, the R3001 Manual, which is part of the contract, requires agents to obtain series 6/63 licensing within 24 months of signing. This is of little concern to those who already have their 6/63 licenses, but for those who don’t, it will likely be a distasteful side effect. If a manager denies this, remember that it is in the new contract to which you are agreeing to sign. Beware. FLORIDA AGENTS ONLY - SPECIAL PROVISIONS The Florida Region has implemented a different program for policy distribution to agents. Florida agents can elect to have the assigned book recorded under a separate agent number. The agent will operate both books from one location and at the end of two years, must either merge the additional agent number into the primary agency, sell it, or return it to the CIC. While the assigned policies have their own agent number, the retention, loss ratio and ALI will not affect the agent’s primary book. It is not eligible for RFG. It is probable that the Florida program was set up this way because of the infamous loss ratio problem there. Many Florida agents would probably not be too keen about accepting risky policies that could negatively affect their bonus. Florida agents should beware of the requirement to sign a new contract. Again, the TPP and the securities license requirements are different than the pre- 1999 contracts. How are agents selected to receive the policies NAPAA has been unable to determine a clear pattern of agent selection. It appears that each region may be determining its own criteria. One agent reported that his region will only assign policies to newer agents with less than 11 years with the company. Others have been surprised to receive CFPA policies even though they failed to achieve Expected Results. If you are interested in receiving policies, NAPAA recommends that you contact your regional management and ask whether you qualify. One Last Note Sales managers are scouting for agents who are planning to leave Allstate in order to confiscate their books for new scratch hires. Agents have reported that their managers have informed them that they will deny any buyer approval request because it is their intention to take the book to seed a new scratch agency. We also have reports of managers sabotaging sale negotiations by informing potential buyers that they don’t have to buy the seller’s book because the company will give it to them under the CFPA program. Agents in the process of selling their agency should beware. NAPAA recommends that all requests for buyer approval be submitted in writing directly to the FVP and Human Resources. If your buyer is recruited as a direct hire, be sure to request the referral fee from HR. Ef Winter 2011/2012 Exclusivefocus — 17
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